United States District Court, S.D. New York
For Securities and Exchange Commission, Proceedings under Section 20(c) of the Securities Act of 1933 and Section 21(e)(1) of the Securities Exchange Act of 1934 to enforce compliance with an order of the Securites and Exchange Commission, Plaintiff: Howard A. Fischer, John J. Graubard, LEAD ATTORNEYS, Andrew Matthew Calamari, Securities & Exchange Commission (3 WFC), New York, NY.
Walter V. Gerasimowicz, Defendant, Pro se, New York, NY.
OPINION AND ORDER
John G. Koeltl, United States District Judge.
The petitioner, the Securities and Exchange Commission (" SEC" ), seeks an order enforcing a final SEC order (the " Final Order" ) against Respondents Walter Gerasimowicz, Meditron Asset Management, LLC (" MAM" ), and Meditron Management Group, LLC (" MMG" ), (collectively, " Respondents" ). In administrative proceedings, the SEC found that the Respondents violated federal securities laws by engaging in fraudulent conduct that caused significant losses to investors. In its Final Order, the SEC required that the Respondents pay disgorgement, jointly
and severally, in the amount of $3,143,029.41 plus prejudgment interest. The Final Order also requires that the Respondents pay a civil money penalty, jointly and severally, in the amount of $1,950,000.00.
The SEC seeks enforcement of its Final Order pursuant to Section 20(c) of the Securities Act of 1933 (the " Securities Act" ), 15 U.S.C. § 77t(c), and Section 21(e)(1) of the Securities Exchange Act of 1934 (the " Exchange Act" ), 15 U.S.C. § 78u(e)(1). This Court has jurisdiction pursuant to Section 20(c) of the Securities Act and Section 21(e) of the Exchange Act.
The following facts are undisputed, unless otherwise indicated.
Respondent Gerasimowicz is a New York resident, and was the Chairman, Chief Executive Officer, and Chief Compliance Officer of MAM, and the sole owner of MMG. (SEC Application for Order Enforcing Compliance with Commission Order (" Application" ) ¶ 3.) Respondent MAM is a New York limited liability company with its principal place of business in New York, and Respondent MMG is a Delaware limited liability company with its principal place of business in New York. (Application ¶ ¶ 4-5.)
The SEC initiated administrative proceedings against the Respondents on September 14, 2012. (Application, Ex. 1 (" Order Instituting Administrative Proceedings" ).) In the administrative proceedings, the SEC alleged that the Respondents had violated several federal securities laws, namely: Section 17(a) of the Securities Act; Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder; and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 (the " Advisers Act" ) and Rule 206(4)-8 promulgated thereunder. (Order Instituting Administrative Proceedings at 9.) The SEC sought, to the extent appropriate, orders requiring that the Respondents cease and desist from any unlawful activity, and that the respondents pay disgorgement and civil money penalties. (Order Instituting Administrative Proceedings at 10.)
After submitting an Offer of Settlement, the Respondents consented on May 3, 2013 to entry of an order (the " Consent Order" ) that made findings of fact and imposed monetary sanctions in an amount to be determined in subsequent proceedings. (Application, Ex. 2 (" Consent Order" ) at 2, 10.) In the Consent Order, the SEC found that the Respondents had willfully violated the charged provisions of the Securities Act, the Exchange Act, and the Advisers Act. (Consent Order at 9.) The SEC also found that Gerasimowicz had willfully aided and abetted and caused MAM's and MMG's violations of the Securities Act, the Exchange Act, and the Advisers Act. (Consent Order at 9.)
More specifically, the Consent Order found that the Respondents misappropriated and misused the funds of Meditron's Fundamental Value/Growth Fund (the " Meditron Fund" ), and misrepresented or failed to disclose to investors significant deviations from the Meditron Fund's stated investment strategy and disclosed valuation policy. (Consent Order at 2.) The Consent Order also found that Gerasimowicz and MAM failed to disclose a material conflict of interest, that Gerasimowicz misrepresented MAM's regulatory assets under management, and that MAM, aided and abetted by Gerasimowicz, violated the custody rule applicable to registered ...